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Harris Corporation HRS
Q1 2013 Earnings Call Transcript

Transcript Call Date 10/29/2012

Operator: Good day, ladies and gentlemen, and welcome to the Q1 2013 Harris Earnings Conference Call. My name is Sonia and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question and answer session towards the end of this conference. As a reminder, this call is being recorded for replay purposes.

I would like to turn the call over to Pamela Padgett, Vice President of Investor Relations. Please proceed, ma'am.

Pamela Padgett - VP, IR: Hello, good afternoon everyone. Welcome to Harris's first quarter of fiscal 2013 earnings call. I'm Pamela Padgett and on the today is, Bill Brown, President and CEO; Gary McArthur, Senior Vice President and Chief Financial Officer; and Dan Pearson, Executive Vice President and Chief Operating Officer.

Before we get started a few words on forward-looking statements. In the course of this teleconference management may make forward-looking statements. Forward-looking statements involve assumptions, risks and uncertainties that could cause actual results to differ materially from those statements. For more information and a discussion of such assumptions, risks and uncertainties, please see the press release and filings made by Harris with the SEC.

In addition, in our press release and on this teleconference and the related presentation, we will discuss certain financial measures and information that are non-GAAP financial measures. A reconciliation to the comparable GAAP measures is included in the tables of our press release and on the Investor Relations section of our website, which is www.harris.com. A replay of this call will also be available on the Investor Relations section of our website.

With that, Bill, I'll turn the call over to you.

William M. Brown - President and CEO: Thank you, Pam, and welcome to our first quarter fiscal 2013 earnings call and I wish that all of you in Hurricane Sandy's path remain safe.

I'll begin today's call by turning to Slides 3 and 4 in the presentation. Harris first quarter results were about as expected and represent a good start to fiscal 2013. Revenue was $1.3 billion and down 6% with earnings per share of $1.14, flat with prior year non-GAAP EPS of $1.14. Although lower revenue and income in Tactical Communications and IT Services resulted in a decline in total Company results, we were able to hold operating margin essentially flat with the prior year, reflecting reduced costs across the Company.

We are tracking well to our productivity target of $75 million with cost reductions taking place across operating units and at corporate headquarters. Based on first quarter results, corporate expense is on track to be $70 million for the year, which is about $12 million lower than the prior year.

The cost reduction is not coming at the expense of R&D investment and product innovation for the future. In the first quarter, total Company funded R&D increased 4% and in our RF Communications by 6%. In Tactical Communications, we were especially pleased with our success in lowering costs other than R&D. Even with the significant revenue decline of 18%, Tactical operating margin held steady at last year's level. Total RF Communications' operating margin was slightly lower as a result of business mix related to the revenue growth of 12% in Public Safety.

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